Avanti Feeds Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Avanti Feeds Ltd (AVANTIFEED) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:23:05] Onkar Kulkarni from Shree Investments asked about the margins in the medium to long term, considering the softening of RM prices. C. Ramachandra Rao JMD said that RM prices are likely to go down, but it’s uncertain how much. The government has released 50 lakh tons of wheat, and the market reaction is still unknown. So it’s difficult to give any specific percentage of profit margin.

• [00:29:36] Onkar Kulkarni from Shree Investments also asked that with all the headwinds, what kind of revenue AVANTIFEED is expecting in 2-3 years. Alluri Nikhilesh ED replied that AVANTIFEED has started taking in new product orders and shipping out trial orders. In 2-3 years, when these products become fully commercialized, there will be higher revenues and a higher level of realization. However, the quantity may not increase as much as the value due to the high-value nature of the products.

• [00:32:58] Onkar Kulkarni from Shree Investments queried that with additional capacity commencing recently, what kind of asset turn is expected. Alluri Nikhilesh ED said a number cannot be put to it right now because AVANTIFEED is in the early stages of gaining recognition for this new product. The company needs to diversify its product portfolio in order to increase margins and revenues.

• [00:34:02] Onkar Kulkarni from Shree Investments queried that on feed, since capacities have gone up, how much revenue can be produced with the increased capacity. A. Indra Kumar Chairman said AVANTIFEED has increased its capacity to 1.75 million tonnes and upgraded technologies in order to meet customer requirements. With the world scenario improving, AVANTIFEED anticipates revenue increases with an increase in shrimp culture.

• [00:36:34] Onkar Kulkarni from Shree Investments queried about utilization of cash. A. Indra Kumar Chairman replied that AVANTIFEED has expanded its own generation and require funds for the working capital. Working capital requirement in this industry is very high. So the plan to expand to new segment is still on. If the markets are right, production and supply can begin within 6 months.

• [00:39:37] Vishwanath Shettigar asked about shrimp feed price, that if there is decline in RM prices, will govt. put pressure to reduce prices by the company.  A. Indra Kumar Chairman answered careful market analysis is needed to ensure customer comfort and competitive pricing. Govt. interference must also be taken into consideration.

• [00:40:56] Vishwanath Shettigar also asked about the falling ROE and ROCE. C. Ramachandra Rao JMD said that ROE and ROCE depends on revenue, expenditure, net profits, PBT and other factors. Unless there are better opportunities to invest in, it is difficult to improve both ROE and ROCE.

• [00:42:52] Vishwanath Shettigar asked about hatcheries outlook. C. Ramachandra Rao JMD answered that the hatchery business is providing good quality seed to shrimp farmers and has a scale-up capacity of 1 billion, which would result in around INR30 crores of revenue.

• [00:46:21] Runav Shah from Equitas enquired about the current capacity utilization of the existing feed plant. C. Ramachandra Rao JMD said AVANTIFEED was utilizing about 98% of its capacity in feed plant before the expansion and now that the season has started, it’s at 80%. As stocking continues, it’s expected to reach 90-95% capacity.

• [00:49:08] Runav Shah from Equitas asked about the current proportion of value-added products in the  exports and processing division. A. Indra Kumar Chairman answered that it is around 24% to 25% of the value-added.

• [00:58:08] Onkar Kulkarni of Shree investments asked about any opportunity arising like Vannamei shrimp in future for AVANTIFEED. A. Indra Kumar Chairman replied that a lot of innovation is going on which has to come to the commercial viability.

• [01:00:35] Onkar Kulkarni of Shree investments queried about cash on balance sheet as of Dec. 1. A. Indra Kumar Chairman replied that AVANTIFEED has about INR1,100 crores in balance sheet.